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April 17, 2024 at 01:44 PM
What You Need to Know
- Massachusetts Investors Trust and QQQ changed how people invest.
- The asset management industry has a long history of innovation, and it's not done.
- What’s coming? The rise of blockchain technology and the integration of AI in investment management.
This year marks the 100th of the Massachusetts Investors Trust and the 25th anniversary of the Invesco QQQ Trust.
Both innovations altered the course of financial history, creating wealth for tens of millions of Americans — and successful careers for people like you and me. Let’s pay homage to these funds — and see what they show us about the future of investing.
Massachusetts Investors Trust: The First Mutual Fund
When the Massachusetts Investors Trust (MITTX) debuted in 1924, it was the first opportunity for ordinary investors to own a diversified portfolio of stocks. It seems quaint today, but this was a revolutionary idea.
The idea was conceived by Edward Leffler, and it took him years to bring the product to market. His vision of a transparent, ethical fund was a bold idea, and he introduced standards for investor protection and transparency that became the bedrock of the mutual fund industry.
For the first time, thanks to Leffler, individuals could own a diversified array of stocks with just a small amount of money. MITTX wasn’t just a new financial product; it was a revolution in financial inclusion. The fund was so successful that it spurred Congress 16 years later to regulate the new mutual fund industry via the Investment Company Act of 1940 — a law that has protected investors for nearly a century, underscoring the mutual fund’s unequaled role in modern personal finance.
Without MITTX — which still exists, part of the MFS family of mutual funds — we wouldn’t have the mutual fund industry that we know so well.
QQQ: The Dawn of the ETF and Tech Revolutions
By the time Invesco launched QQQ in 1999, mutual funds dominated the investment world. But this wasn’t just another mutual fund; it was a revolutionary product in three ways: first, it was an ETF, at a time when ETFs were still new and little used. Second, it capitalized on the technology boom. And third, it was a passively managed fund at a time when active management was the standard approach.
Together, these innovations helped raise Nasdaq’s prominence in the investment field. QQQ invests in the 100 largest non-financial companies listed on Nasdaq. The cap-weighted fund and its underlying index are reconstituted annually and rebalanced quarterly. This approach was a revelation, featuring intraday trading, low cost and tax efficiency (it has never paid a capital gain distribution) that mutual funds couldn’t match.
QQQ wasn’t merely an alternative to mutual funds; it was a forward-thinking solution that anticipated the tech sector’s explosive growth. Its success — it’s one of the five largest ETFs in the world — spurred the ETF and technology-investment revolutions.
The Continuous Evolution of Investment Vehicles
As we celebrate these milestones, it’s essential that we keep in mind that the asset management industry has already innovated — and the industry isn’t done.
